Switching to a new provider could cut your interest rate in half

common. “There are lots of cases where children find out after their parents have died that their inheritance has gone, and they didn’t know anything about it,” he said.

David Burrowes of the Equity Release Council, the industry trade body, encouraged customers to discuss their decision with family members. He said some plans now let homeowners ring fence part of the value of the property for inheritance.

When Mrs Rosenthal contacted Hodge Lifetime she was told that she could either pay off the whole loan or remain on a rate of 7.15pc. Until she contacted Telegraph Money she was unaware that she could move. Mr Daley said many customers were paying much more than they needed to.

“Although interest rates on equity release have come down in the past few years, there are still examples like this of plans that charge far too much,” he said. “When Bank Rate is 0.75pc, it’s hard to see how any lender could justify charging almost 10 times that.”

Hodge Lifetime said all its plans were sold on an advised basis and it recommended that customers review their finances regularly. It said that while Mrs Rosenthal’s interest rate had not fallen in line with Bank Rate, it would not rise if interest rates were to increase.

Andy Wilson of Andy Wilson Financial Services, a specialist equity release adviser, said that while interest rates of 7.15pc were typical in 2004, Mrs Rosenthal could halve her interest charges by switching to a rate of 4.55pc elsewhere. This would give her 18 years before the remaining equity in her home was eaten up.

However, the charges applied to customers who want to move can make it uneconomical to do so. Mr Wilson said he saw one case of a £20,000 loan with a penalty of £20,000 to switch.

Charges are often high because providers link early repayment charges inversely to the “gilt” rate, the yield on UK government bonds. As the gilt rate has fallen in the years since the financial crisis, the cost of repaying a loan has rocketed for customers who took out a loan before the crash.

Simon Chalk of Later Living Now, an equity release advice firm, encouraged Mrs Rosenthal, whose plan does not have an early repayment charge, to consider moving elsewhere.

“Switching lenders is just as straightforward as with an ordinary mortgage,” he said. “Borrowers should insist that the adviser provides clear justification in writing for doing so. There will inevitably be costs, such as advice and legal fees, in addition to any charges from the new and old lender alike.

“A good adviser would state the break-even point (how many years it will take for any fees to be outweighed by savings from a lower rate) and the saving to the estate, using reasonable life expectancy.”